What’s Next for Blockchain? Decentralized Autonomous Organizations

A term coined by Ethereum founder Vitalik Buterin in 2014, Decentralized Autonomous Organizations (DAOs) are fully democratized blockchain-based communities. They are collectively owned and managed by their members.

The community governs a DAO by voting on proposals, thus granting a voice to everyone in it. This way, DAOs provide a safe, transparent, and efficient environment for collaborating with like-minded individuals around the world and directing funds to various causes. The community also votes on any changes in the DAO’s structure, rules, future development, and the like.

They are more transparent than traditional organizations because they don’t have hierarchies and authority figures who can authorize spending or alter the books as they like. The only way to access a built-in treasury and manage the funds in a DAO is through the community’s approval.

Regulatory support

Although there are already plenty of DAOs, most of them have had trouble being recognized by the legislation. However, the situation seems to be changing. In July 2021, the legislators in Wyoming, United States, passed a bill allowing DAOs to be officially registered in the state. This has given them the same rights as a limited liability company (LLC).

Thanks to this legislation, DAOs not only receive legitimacy in the eyes of the law, but now it’s also cheaper and easier to organize them. This has led to the recognition of the country’s first legal DAO - CryptoFed DAO. Australia is also on the verge of legally recognizing DAOs. The Digital Law Association and Herbert Smith Freehills petitioned a Senate committee to recommend the creation of a new type of legal entity. Under the Corporations Act, this would be a limited liability DAO (“DAO Limited”), where an internet community replaces a board of directors. This would allow project governors to contract in the real economy and prevent the DAO members from potential liability for losses incurred by decisions by a member of a community. Moreover, it would make Australia an attractive location for digital asset businesses and create new blockchain-industry jobs.

API3 transition to DAO governance

DAOs are not always launched as new entities. Sometimes, an existing platform will change its modus operandi to become a DAO. One of these is API3, a decentralized API network that allows data providers to turn into their own blockchain oracles through its Airnode gateway.

API3 has launched its authoritative DAO that allows all API3 token holders to partake in the platform’s governance and permissionless staking. This makes it the first web 3.0 oracle utilizing the DAO model. This DAO has also taken control of most of API3’s treasury, containing $23 million USDC, 25 million API3, and other tokens from DAO-to-DAO token swaps.

Creating DAOs

Individuals and businesses can quickly and easily build and launch their own DAOs thanks to platforms such as Aragon, an Ethereum-based open-source dApp. If you have enough ETH in your wallet (such as MetaMask) for gas fees, you only need to navigate to the DAO-building platform’s website. There, you will connect your wallet and complete the approval process.

The next step is to choose a template for your DAO and enter its name. Then, you’ll set up:

The support percentage (the percentage of tokens needed to approve the voting in favor of ‘yes’),
Minimum approval percentage (the percentage of ‘yes’ votes needed for the approval of the proposal from the remaining pool of tokens), and
Vote duration (the time that participating members have to cast a vote).

Now you need to set up the token. First, you’ll enter its name and symbol. Next, you’ll enter the token holders, i.e. DAO members, and allocate tokens to them. After you’ve reviewed the information, click ‘Launch your organization”. The MetaMask popup will ask you for transaction approval and your DAO will be ready upon confirmation.

Notable DAOs

Decentralized Autonomous Organizations

There are many DAOs and the most prominent include MakerDAO, The LAO, and Moloch DAO - just to name a few. You can explore the range of DAOs using this handy site.

MakerDAO is a DeFi organization that facilitates cryptocurrency lending, borrowing, and savings, as well as providing a stable cryptocurrency (DAI) on the Ethereum blockchain. The stability of the DAI token and governance for the Dai Credit System is supported by the Maker (MKR) token.

The LAO is an Ethereum-based venture capital fund that allows members to pool capital, invest in innovative projects using ETH, and receive a share of any proceeds from the investment. By purchasing the platform’s LAO tokens, holders can participate in its governance.

Moloch DAO is a DAO created to fund and award Ethereum 2.0 grants to projects across the ecosystem relating to privacy, layer 2 scaling, client security, and more. It doesn’t utilize a token. Instead, members simply contribute ETH to a pool that grants them access and voting shares into the DAO. The shares are ERC-20 incompatible, preventing them from being bought and sold.

Conclusion

DAOs are the true representatives of the underlying principles of blockchain. They’re decentralized, transparent, democratic, and create immense opportunities for anyone involved. The mainstream is yet to accept them as a legitimate option for doing business, partially due to the lack of understanding. However, legislators around the world are slowly beginning to recognize their potential.

What do you think the future holds for DAOs? Have any questions or comments, or have you noticed something we missed? We’d love to hear from you, so drop us a comment! We also invite you to check out our blog or join us on our informative and entertaining Blockchain Innovators podcast. There you can learn more about the revolutionary world of blockchain and its constant innovations.

Business Solutions, DAO